Labor hints at tax cut shift

Defending the Australian Government’s pledge to deliver tax cuts to higher income earners despite the nation’s $32 billion deficit, Ms Plibersek stuck to the script that the tax cuts are legislated and a clear election promise.

However, the Environment Minister also appeared to leave the door open to future changes, while stressing this was a matter for Treasurer Jim Chalmers.

Speaking on ABC radio, Ms Plibersek was asked, “Can we really afford to give the wealthiest Australians a tax break given the economic circumstances have changed so dramatically since they were first legislated?”

“Well, we did go to the last election committing to continue with those,’’ Ms Plibersek replied.

“What the UK does with their tax system is a matter for them. But it didn’t seem very sensible to me, what the Conservatives there were proposing.”

The Australian Financial Review reports today that the Albanese Government has privately canvassed options to wind back or cap the windfall gains for the rich, but no decisions have been made.

One option would be to put a deficit levy for high income earners temporarily over the top after the next election.

However, the Government is not of a mind to scrap the tax cuts and any changes would need to be legislated by parliament.

Any decisions taken before the next election would risk breaking a clear election pledge.

The tax cuts proposed in Britain would have scrapped the 45 per cent top tier tax rate for those earning over £150,000 a year ($A262,000), making it 40 per cent for everyone earning over £50,270 ($A88,000).

By comparison, while the tax cuts in the UK would have delivered almost two-thirds of the benefits to the richest 20 per cent of workers, in Australia the stage three cuts in 2024 will deliver that group around three-quarters of the benefits.

Australia’s legislated 2024 tax cuts are set to remove the $120,000 to $180,000 tax bracket, increase the top tax bracket threshold from $180,000 to $200,000, and reduce the marginal tax rate faced by the $45,000 to $200,000 tax bracket from 32.5 per cent to 30 per cent.

The changes will therefore create a 30 per cent flat tax rate for anyone earning between $45,000 and $200,000.

According to the Parliamentary Budget Office, estimates predict the tax cuts will cost a cumulative $243.5 billion out to 2032-33.

Of that amount, 6 per cent will go to the richest 1 per cent of income earners and 77 per cent will go to the richest 25 per cent.

Ms Plibersek was then asked if the Albanese Government would go ahead with something that hasn’t even started which is also about tax breaks for the very wealthy.

“These tax cuts haven’t come in,’’ she said.

“They won’t until 2024. I think it’s, you know, important for us to have a look at the October budget statement that Jim Chalmers will release and have a good look at the state of the economy there and Labor’s plans to repair it.

“I mean, you know, we’re in a pretty tough economic position. We’re looking at global headwinds potentially and global recession. We’ve got have all of the information before us before we’re making any further decisions.”

Ms Plibersek said she could be asked the question “six different ways” and she wasn’t going to go further than that.

“We made a commitment,’’ she said.

Asked again if the Albanese Government would “stick to a commitment without any review if dramatic changes have happened to the economy,” she replied: “I think this is a conversation for you and the Treasurer and the Prime Minister.”

She added: “My view is that we implement Labor Party policy and that we took a commitment to the last election.

“I think we always need to consider economic circumstances as we’re making decisions. That applies to the extra effort we’ll make to ensure that multinationals are paying their tax. It means that we’ll have a look at some of the foolish spending of the previous government – we’ll make some decisions about that. And you’ll see all of that made clear in Jim Chalmers’ budget statement in October.”

The Treasurer told ABC’s 7:30 last week: “Our position on the tax cuts hasn’t changed; our policy is as it has been.

“We do need to make sure that the money that we invest in the budget, from the budget, in the Australian people and in their economy, does get maximum bang for buck,” Dr Chalmers said.

“Even if we took some of the steps that people have been urging us to do on stage three tax cuts, that would not change the inflationary environment that we [are confronted by] right now.

“I think the public conversation sometimes doesn’t quite understand that.”